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0 pointsSoftTalker3d ago0 comments

If you are trading in the futures market and you don't have inside info or are not an actual supplier of the commodity, you are the sucker.

0 comments

spacebanana73d ago

To be fair, you could also be a real world user of a commodity and productively use futures markets. For example, an airline or trucking company using them to hedge fuel prices.

nyeah3d ago

Sure, and increasingly those people are being played for suckers. The article makes that point.

mothballed3d ago

Less so than those buying it for spot? They need oil one way or another, whether from a future contract or the spot market (or downstream thereof).

tardedmeme2d ago

Then your average price is higher than average. I heard airlines don't use futures any more because they need to keep costs low.

rbanffy2d ago

Future exists to stabilize instantaneous commodity prices.

They also allow some insights on future demand, which can help you plan production of your commodity.

futevolei2d ago

Look in the general sense that retail traders lose money you are right but that applies to all markets, sports betting and casinos. However I and many of my friends live in houses paid for with profits made from futures trading and none of us have inside info or supply commodities. It takes discipline, skill, risk management, emotional management and drive to make it happen but it does happen.

jimlawruk3d ago

Isn't there a 50% chance you are betting on the "insider" side of it?

adamandsteve3d ago

There's a <50% chance you'll make money off of it because it's zero-sum, and if insiders make money on average then other traders (i.e., you) have to lose money on average.

The issue is that the odds aren't actually 50/50 on you buying either side of the trade; one half will look like a better deal (and given public information, it is a better deal) so you'll buy that half. Then when the market resolves, it'll turn out that insiders knew some piece of information that made the other half of the trade a better choice.

jimlawruk2d ago

So then the person who uses public information is actually the bigger fool than someone who uses no information whatsoever and just picks a side of the bet. If insiders know that a volcano is going to erupt and offers a 50/50 payout, people who know the historical improbability will bet that is will NOT erupt, thinking it is an easy payout. But there will be some idiots out there that bet that it will erupt based on dumb luck.

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tardedmeme2d ago

If that was the case you'd start consistently buying the side that looks worse, which would align with insiders and you'd make money.

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ahaferburg2d ago

Yes. It's a conditional probability.

P(W | You're a sucker) = 0.5

zuzululu2d ago

actually futures market is hardest to rig compare to options and stocks but markets are also efficient they say.

hard to win at a game where 97% fail in the long run.

otterley3d ago

That logic would also extend to individual stocks, wouldn’t it?

avidruntime2d ago

It kind of can, but trading futures is trading termed contracts, kind of like options, but a bit stranger (and you can buy options for futures contracts too!) For a retail trader, you definitely are not in a buy and hold/invest mindset. Often people use futures as a hedge or for locking in prices for physical delivery- it serves a very real world problem.

staplor3d ago

If you consider 'trading' to be short term buying and selling of stocks, then yeah. Holding stocks long term is nothing like trading commodities though.

SoftTalkerOP3d ago

I suppose if you're shorting or trading options generally, yes to some extent.

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spacebanana73d ago

To be fair, you could also be a real world user of a commodity and productively use futures markets. For example, an airline or trucking company using them to hedge fuel prices.

nyeah3d ago

Sure, and increasingly those people are being played for suckers. The article makes that point.

mothballed3d ago

Less so than those buying it for spot? They need oil one way or another, whether from a future contract or the spot market (or downstream thereof).

tardedmeme2d ago

Then your average price is higher than average. I heard airlines don't use futures any more because they need to keep costs low.

rbanffy2d ago

Future exists to stabilize instantaneous commodity prices.

They also allow some insights on future demand, which can help you plan production of your commodity.

futevolei2d ago

jimlawruk3d ago

Isn't there a 50% chance you are betting on the "insider" side of it?

adamandsteve3d ago

There's a <50% chance you'll make money off of it because it's zero-sum, and if insiders make money on average then other traders (i.e., you) have to lose money on average.

jimlawruk2d ago

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tardedmeme2d ago

If that was the case you'd start consistently buying the side that looks worse, which would align with insiders and you'd make money.

1 more reply

ahaferburg2d ago

Yes. It's a conditional probability.

P(W | You're a sucker) = 0.5

zuzululu2d ago

actually futures market is hardest to rig compare to options and stocks but markets are also efficient they say.

hard to win at a game where 97% fail in the long run.

otterley3d ago

That logic would also extend to individual stocks, wouldn’t it?

avidruntime2d ago

staplor3d ago

If you consider 'trading' to be short term buying and selling of stocks, then yeah. Holding stocks long term is nothing like trading commodities though.

SoftTalkerOP3d ago

I suppose if you're shorting or trading options generally, yes to some extent.

j / k navigate · click thread line to collapse